Topic: GFC MkII?

[BarryCrocker]

Hoping this isn't the start of another GFC. Credit Suisse and Deutsche Bank supposedly both on rocky ground.

Credit Suisse reassures investors over bank’s financial strength

Executives contacted clients after credit default swaps suggested growing worries over group’s health

Senior Credit Suisse executives spent the weekend reassuring large clients, counterparties and investors about the Swiss bank’s liquidity and capital position in response to concerns raised about its financial strength.

Executives hit the phones after spreads on the bank’s credit default swaps, which offer protection against a company defaulting, rose sharply on Friday, indicating investor worries over the bank’s financial health.

“The teams are actively engaging with our top clients and counterparties this weekend,” said a Credit Suisse executive involved in the discussions. “We are also getting incoming calls from our top investors with messages of support.”

The executive denied recent press articles that the bank had formally approached investors about potentially raising more capital, insisting that the bank was trying to avoid such a move with its share price at record lows and higher borrowing costs due to rating downgrades.

Having seen Credit Suisse’s share price drop more than 25 per cent last month to below SFr4, chief executive Ulrich Körner sent a company-wide memo on Friday to try to reassure staff over the bank’s capital position and liquidity.

His move also followed a sharp rise in credit default swaps, a gauge of investor sentiment towards risk, that have jumped more than 50 basis points over the past two weeks, hitting 250bp on Friday.

In a subsequent briefing note on topics to discuss with clients sent to Credit Suisse executives on Sunday, following rumours about the bank’s financial health on social media, staff were told: “A point of concern for many stakeholders, including speculation by the media, continues to be our capitalisation and financial strength.

“Our position in this respect is clear. Credit Suisse has a strong capital and liquidity position and balance sheet. Share price developments do not change this fact.”

A top executive at a firm that was contacted by Credit Suisse said his view is that the Swiss bank is “the worst big bank in Europe”, but it is not in immediate danger.

“We are not having meetings on this topic,” he said. “I don’t think it’s a crisis.” The bank’s falling share price reflects its deep woes and the lack of any obvious solution, the executive said.

While the local Swiss bank is highly profitable and the global private bank still has a strong brand, potential investors and buyers are concerned that the investment banking arm could have concealed expensive liabilities.

Körner and the bank’s board, chaired by fellow former UBS executive Axel Lehmann, are due to present a plan to revamp the business to address the investor concerns on October 27 along with its third-quarter results.

Analysts at Deutsche Bank last month estimated the restructuring would leave a SFr4bn hole in Credit Suisse’s capital position.

“We will be doing asset sales and divestitures just so we can fund this very strong pivot we intend to achieve towards a stable business,” said the senior executive at the bank involved in investor calls.

Credit Suisse declined to comment.

Korner, who previously ran Credit Suisse’s asset management business, was installed as chief executive over the summer with a brief to strip back the group’s investment bank and slash costs — moves that are likely to lead to thousands of job cuts.

The board’s latest plan is to split the investment bank into three and resurrect a “bad bank” holding pen for high-risk assets and business units earmarked for disposal, the Financial Times has reported.

“No doubt there will be more noise in the markets and the press between now and the end of October,” Körner wrote on Friday. “All I can tell you is to remain disciplined and stay as close as ever to your clients and colleagues.”

Uncertainty over the bank’s future has already led to a number of executive departures. Jens Welter, who had been co-head of global banking, is the most recent high-profile defector, having agreed to join Citigroup.

Additional reporting by Brooke Masters in New York

https://www.ft.com/content/c62bea1f-2929-4473-838d-665dc6c45f83

@GrahamStephan
$600 Billion: What Lehman Brothers held in assets when they crashed and took the economy with them.

$2800 Billion: What Credit Suisse and Deutsche Bank control in AUM. 4.6x more.

Credit Suisse is at a 'Critical Moment' now, says the CEO.

What lies in store for the world?🧵

[Studgotelli]

Sure feels like one is coming doesn’t it? A perfect storm is brewing.

[So… Howard Philips]

And the chairman of their board is Axel Lehman - you couldn’t make it up.

[Andy82lfc]

I mean shit has been brewing for a good few years now, if a massive crash were to happen in the next couple of years it would not come as a big surprise, but I suppose it would not be if all turned out fine also. As always these things are near impossible to predict until they actually start happening.

[BarryCrocker]

And the chairman of their board is Axel Lehman - you couldn’t make it up.

Nominative determinism.

[thaddeus]

I had to Google what "GFC" stood for.  I wish I'd not bothered on an already dreary Monday morning 

Spoiler

Global Financial Crisis

[close]

[Red-Soldier]

I had to Google what "GFC" stood for.  I wish I'd not bothered on an already dreary Monday morning 

Spoiler

Global Financial Crisis

[close]

I remember watching bankers and city workers jumping out of buildings 

[Jiminy Cricket]

Credit Default Swaps, again! Though, I did understand that they started up again almost immediately after the GFC (or never went away), so I am not really surprised. But what do I know?.. My information comes from a recent viewing of The Wolf of Wall Street.

[kloppismydad]

We will see some major event happen sometime soon. There's too much turmoil for it not to happen.

Equity markets going down globally despite brent hovering around $80 (going up now, though) and inflation continuing to rise. Have to sit tight and hope nothing catastrophic happens.

[Mumm-Ra]

I remember watching bankers and city workers jumping out of buildings

Wait, really? I thought that was just in the 1920s

I may be getting whooshed

[SouthDerryLaggo]

Credit Default Swaps, again! Though, I did understand that they started up again almost immediately after the GFC (or never went away), so I am not really surprised. But what do I know?.. My information comes from a recent viewing of The Wolf of Wall Street.

the big short 

[Indomitable_Carp]

Wait, really? I thought that was just in the 1920s

I may be getting whooshed

I thought so as well! But I think he means 1929 was MKI, 2008 was MKII and this would be MKIII!

[Jiminy Cricket]

the big short 

Ah! Right you are!!

You know, I even looked up the title cast because I had a feeling I was mixing it up, saw Margo Robbie and immediately concluded that I had the correct film.